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LinuxCare goes the IPO way
Just as the title says, LinuxCare has filed for its IPO. Linux Weekly News has posted a summary of the S-1 filing. The full S-1 can be found here. Many people are waiting for Linuxcare to go public. I wish them very good luck.
They're solving the chicken and egg problem. People don't want to get into Linux because there are not many support solutions, and Linuxcare doesn't have too much revenue b/c there aren't that many people using Linux. Show the world that there is good support, and more people will give Linux a try. This leads to more revenue for LXCR, thus improving services, thus attracing more people to Linux, and so on...
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Deepak Saxena
Deepak Saxena
"Computers are useless, they can only give you answers" - Picasso
This is a flame. It's also sarcastic in parts.
This company is really little better than LinuxOne. It is attempting to get rich off the backs of OS programmers everywhere, and trade on the popularity of the Linux name.
In reality, all this company does is sell support and consultancy. Like about, oh 2000 other companies. Except they focus on Linux, which as we all know is a radically new OS with hardly any similarity to any other OS, so re-training people to be Linux consultants will be REALLY hard, and other companies will find it SOO hard to catch up. Also, Linux is frequently used in massive fault tolerant systems where you really need expert help from the kind of people who understand the code at the lowest level. By contrast, Linux is hardly ever used for simple http and filesharing jobs where, frankly, you can get all the help you need in house or from contractors.
This company makes a loss TWENTY TIMES its REVENUE. That's like spending twenty pounds to make one pound. Bargain. I know, I'll ask LinuxCare to send me a cheque for 1000 quid, and I'll send one back for 100 quid, a deal apparently twice as good as the deals they are making now.*
72% of this company's revenue comes from three clients. That means that those clients hold an axe above the company's head. They are practically a division of their three main clients.
"If we fail to adequately promote and maintain our brand name or are unable to
continue using "Linux" as part of our brand name, our business may be adversely
affected.
"
Ha ha ha well isn't that topical. Sorry, couldn't resist. Let's defend this company's use of 'Linux' because they are a really nice company that we all like.
". Mr. Linus Torvalds owns the
trademark to "Linux" and has approved our use of the word Linux in our company
name as well as in the title of our websites.
"
Oh, that's all right then. So long as they have the Royal Warrant....
*My argument here argument is complete sophistry but it's fun so I put it in anyway.
In case you hadn't noticed, I REALLY AM NOT IMPRESSED by all these IPOs. And yes I'll bitch about it on Slashdot until they change the name from 'News for Nerds, Stuff that Matters' to 'Boring Industry Headlines and Capitalist Gossip and Speculation and Back Patting and Hype + some Interviews with My New Rich Friends and Reviews of Films and Books by my New Famous Friends.'
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Red Hat owns no intellectual property due to the nature of the GPL. Its work can be legally plagiarized by anyone (Mandrake, ...etc.) and Red Hat will just be watching and do nothing. This is why they went on an acquisition spree.
VA Linux is just another commodity hardware manufacturer, with some Linux expertise. There is nothing to prevent Dell and Compaq to do the same thing it does, and maybe even better.
Linux Care is different in that it capitalizes on the service portion of things, and have no commodity hardware or GPL handicap.
They have the makings of a long run winner company.
But after all, it is execution that matters.
2bits.com, Inc: Drupal, WordPress, and LAMP performance tuning.
Personally, I think LinuxCare is a little premature in their offering. I won't go so far as to accuse them of trying to cash in on the market's current love affair with all things Linux, but it may seem that way to some ;)
On the plus side, their management team seems to be pretty experienced and certainly knows the computer/technology industry, even though (as LWN notes) they haven't worked together for very long. The company shows strong revenue growth and it has a long list of technical talent.
OTOH, they're burning money like crazy and it looks like that's going to continue. They seem to have venture capital backing from Kleiner Perkins Caufield & Byers (which through KPCB Holdings, Inc. owns 21.1% of the company), but it appears KPCB only made that investment in May 1999. I didn't read enough of the S-1 to find out exactly how much the principals have invested in the firm in dollar terms, but I'm guessing it's not that much.
IMHO, they should go through a few more rounds of private/venture capital financing before looking to public markets. Always be wary of people that want to spend your money and not their own :) However, it could be that KPCB has no more cash to give and they don't want to bring in other VC firms.
My final assessment: LinuxCare will be a good investment, just not right now.
By chance, are you referring to LinuxOne - NOT LinuxCare?
- Jeff A. Campbell
- VelociNews (http://www.velocinews.com)
- Jeff
(I noticed this got moderated as funny.. so now I'm not sure if it is supposed to be a joke or not.)
Anyway, LinuxCare is nothing like LinuxOne. They have a good reputation, and have hired some very big names in Linux Development. One of the core Samba developers (Andrew Tridgell) works for them, as does one of the guys who developed PHP (Rasmus Lerdoff). Try matching that expertise!
I believe that one of the "three major customers" is IBM, who has contracted out all|some (not sure) of it's Linux support work to LinuxCare. That is a pretty good recommendation - Tech Support reputations don't some much better than IBM's
Sure, (just about) anyone can set up a Linux web server, but I'd pay to have the guy who developed PHP available if I couldn't get something to work in PHP. Same with Samba. And say you want to develop a Kernel Driver - you could hire someone, or LinuxCare will do it for you.
I disagree totally with you - what is it we always say the way to make money off Open Source software is? Sell support! And when it comes to Linux Support, these guys have the best reputation I've heard of.
Compare that to Red Hat, say. How are they going to make money? Selling CDs? I doubt it - they are going after the support market, too - bu LinuxCare is vendor neutral, and tightly focused.
The link that you posted above goes to the linux one story.
Whoever moderated it up must not have followed the link either....
LinuxCare has a business model that is actually going to make money. It is true that it might take a year or two, but it will work.
Unlike Redhat, who basically make money by selling a disribution, and then support for it, LinuxCare's primary busines is support. There is a huge market for that.
When a company does a role out of Windows today, they will normally get a support company in to help. The same will be true for Linux (if it succedes on the Desktop). Even in the server area, there is a big market for security auditing, and general support for Linux boxes.
LinuxCare has hired some really good developers - the core developers of Samba & PHP among others. That gives them a good reputation, and excellent expertise in two core Linux areas - file serving & web serving.
They have a "stategic relationships" to die for (from the IPO statement):
That's going to look good on a pitch to any manager - "sure, you could go with a Microsoft certified solutions provider for your Linux support, or you could go with us.... does the MCSP have IBM on their list of clients?"
Just incase you aren't convinced, look at this (also from the IPO thing):
I was wondering if Transmeta was going to ride the wave of their announcement yesterday and be the next IPO we'd hear about. They are not strictly an open source related company, but I think nearly everyone here was listening yesterday. I didn't expect the announcement would come for a few days or even a couple of weeks, but it was the next one I was waiting for.
The net will not be what we demand, but what we make it. Build it well.
Once again, I feel obliged to post a warning about these Linux IPO stocks. As much as we may like a company like LinuxCare that contributes to the "Linux Community", that affection does not necessarily translate into a good investment.
Don't confuse buying their stock with furthering their cause. Once the shares of LinuxCare are sold to the large brokerage houses through the IPO process, the amount of money that LinuxCare receives is fixed. Sure, if the shareprice rises, it means profits for the original shareholders but the company doesn't have more money to pour back into into Linux development (except if they use their company stock as capital to make additional investments. i.e. AOL buying Netscape).
Look at some of the figures for this company. Their revenue for the first 9 months of 1999 was only $304K. They are now $7 Million in debt. Even if revenue grows 10X next year, their revenue will still be only $3MIL. Take a close look at the market capitalization before you buy. With revenues so low, you can't really justify the huge market caps of a Red Hat (17 Billion dollars on 16 Million in sales).
Look at a well established software company like Compuware that is heavy into providing services. Its market cap is $9BIL on just under $2BIL in sales. Compuware is growing at 35% per year. Sure, there will be growth in Linux. Huge growth. But consider how much you might be paying for so little revenue let alone actually showing a profit.
This isn't a technical question or a moral one.
Linux activism can only go so far.
Dave
The headline for the article you linked to is (quoted, so your puny mind can comprehend) "LinuxOne May Be One Linux Company to Avoid"... The slashdot article was titled "BusinessWeek on LinuxOne".
Nowhere in either the post or the article does /[Ll]inux[Cc]are/ show up. Now, get your head out of your @$$ before you post next time.
My $0.25... use it to get a clue!
Eric
- revenue = employed consultants * hours * fee
In the Wallstreet bull market, many companies that are grotesquely over valued (and yes, that does include two Linux companies) often have their market caps defended by the fact that they could see "network effects" or "explosive growth". For Linuxcare to end up being valued as highly as Redhat and VA are today however, there would have to be the expectation that soon they would have more Linux consultants onboard then their are Linux users today (ok, not quite, but still). Consultant companies see neither network effects or value increases of their holdings and products, all they can do to make more money is hire more employees. I think that is worth considering when investing in this company.-
We cannot reason ourselves out of our basic irrationality. All we can do is learn the art of being irrational in a reasonable way.
"Linux Care is different in that it capitalizes on the service portion of things, and have no commodity hardware or GPL handicap."
I don't see in what it is that different from Redhat, after all a distribution is just a service: the install help and the book, all this in a nice package.
So Redhat is a service company like LinuxCare but Redhat has something more: their name.
Linuxcare cannot say they are the expert #1 in any distribution because they don't do any, while Redhat is not only a service company BUT also an expert in a well known distribution.
It's true that anyone can take their distro and make another, like Mandrake, but this isn't a problme, this just further the number of distributions they are expert in (Mandrake being 99% like Redhat like they themself say).
In the end their will be concurrence and the best comanies will stay alive, isn't that what we all want to see???
"The obvious mathematical breakthrough would be development of an easy way to factor large prime numbers." Bill Gates,